After ranting yesterday about Ford, today it's Commonwealth Securities turn. I don't like putting down companies but I feel that criticizing companies on blogs is one way consumers can pressure them to perform better. CommSec's service has shown a very sudden deterioration since the beginning of this calendar year. It's almost as bad as Citibank now:
1. I sent in a request to buy units in a Colonial First State fund (another subsidiary of the Commonwealth Bank) through CommSec. Nothing happened. I contacted CommSec and was told to contact CFS. I contacted CFS and was told to contact CommSec. They told me they had no record of my application and instructed me to send in a new application. Which I did. Two weeks later, I get a call from CommSec: "Mr Moom - the form you sent in to buy CFS funds had a different account number than that of the funds which are on your margin loan". "Um, yes, that was on purpose, I sent the application to you to avoid the 4% load I'd have to pay if I sent the form direct to CFS. But as I've already sent in another application please just cancel this one...".
2. Still nothing has happened with my second application I sent in around 2 weeks ago...
3. I requested to withdraw x thousand units of my total shareholding of y thousand EBI.AX to the new unlisted EAIT. I see online that all y thousand of my units have disappeared from my CommSec account. I phone them up and am reassured that that is just a formality and the y-x thousand units will appear back in my account after the deal closes. I just opened the letter from Everest Financial welcoming me as a new unitholder of y thousand shares in EAIT... I guess not such a big deal, except all that money is now locked up for one year...
Showing posts sorted by date for query ebi. Sort by relevance Show all posts
Showing posts sorted by date for query ebi. Sort by relevance Show all posts
Sunday, February 15, 2009
Sunday, February 08, 2009
January 2009 Report
In USD terms we pretty much matched the MSCI index this month. Of course, this was its worst January ever. In Australian Dollar terms performance was flat and net worth increased slightly.
Income and Expenditure
Expenditure was $3,036 ($A5,015). Car repairs cost $A550. We bought a barbeque ($A365) and there were about $A260 of medical expenses which were partly refunded by Medicare in February. And the car depreciated another $A500. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both lost in USD terms after taking into account the change in exchange rates.
Net Worth
Net worth fell by $17,337 to $188,160 or in Australian Dollar terms rose by $A735 to $295,060.
Investment Performance
USD returns were -8.92% vs. -8.51% or -8.43% for the MSCI and SPX respectively. In AUD terms we returned -0.19%.
All asset classes lost apart from hedge funds, which gained massively mainly due to the delisting of EBI as EAIT. Returns for both EAIT and the Man managed futures fund are now going to be estimated at the time of writing these accounts reports and adjusted later in the month (mid-month and month's end respectively) after the actual returns are available.
Using my preferred time series method, portfolio beta to the MSCI index was 1.31 with an annual alpha of 1.9%. Other methods now give a negative alpha.
Asset Allocation
At the end of October the allocation was 51% in "passive alpha", 57% in "beta", 0% was allocated to trading, 4% to industrial stocks, 5% to liquidity, 4% to other assets, and we were borrowing 21%. Due to the use of leveraged funds, our actual exposure to stocks was 98% of net worth. When we take into account borrowing by the leveraged funds we are invested in, borrowing per dollar of equity was 60 cents. Looking at asset classes:
Shifts in the allocation are mainly due to relative performance this month. We moved further towards our long-term asset allocation, though not for a good reason, but mainly because Australian stocks underperformed and we are overweight in them.
Income and Expenditure
Expenditure was $3,036 ($A5,015). Car repairs cost $A550. We bought a barbeque ($A365) and there were about $A260 of medical expenses which were partly refunded by Medicare in February. And the car depreciated another $A500. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both lost in USD terms after taking into account the change in exchange rates.
Net Worth
Net worth fell by $17,337 to $188,160 or in Australian Dollar terms rose by $A735 to $295,060.
Investment Performance
USD returns were -8.92% vs. -8.51% or -8.43% for the MSCI and SPX respectively. In AUD terms we returned -0.19%.
All asset classes lost apart from hedge funds, which gained massively mainly due to the delisting of EBI as EAIT. Returns for both EAIT and the Man managed futures fund are now going to be estimated at the time of writing these accounts reports and adjusted later in the month (mid-month and month's end respectively) after the actual returns are available.
Using my preferred time series method, portfolio beta to the MSCI index was 1.31 with an annual alpha of 1.9%. Other methods now give a negative alpha.
Asset Allocation
At the end of October the allocation was 51% in "passive alpha", 57% in "beta", 0% was allocated to trading, 4% to industrial stocks, 5% to liquidity, 4% to other assets, and we were borrowing 21%. Due to the use of leveraged funds, our actual exposure to stocks was 98% of net worth. When we take into account borrowing by the leveraged funds we are invested in, borrowing per dollar of equity was 60 cents. Looking at asset classes:
Shifts in the allocation are mainly due to relative performance this month. We moved further towards our long-term asset allocation, though not for a good reason, but mainly because Australian stocks underperformed and we are overweight in them.
Monday, February 02, 2009
EBI Saga Finally Resolved
In the end 27% of shareholders (including 6000 of my own shares) opted to participate in the new unlisted hedge fund of funds EAIT. The remainder will stay in the listed EBI which will be managed by Laxey Partners - an Isle of Man based hedge fund. The plan is to wind up the fund and distribute the proceeds. Unless there is another complete collapse in global share markets this is a great investment - buy $2.38 worth of assets for just over a dollar and get the proceeds redistributed to you mostly in the next couple of years. I may in fact buy more units when I can. I'm bumping the value in my accounts of the unlisted fund to NAV. This will be the biggest positive contribution towards this month's results.
Monday, January 05, 2009
EBB, EBI, and EAIT
Received the documentation and forms for the revised version of the planned EBI delisting today. I'm going to withdraw 6000 of my 8707 shares from EBI and apply for shares in the new unlisted EAIT. The number that I'll keep in EBI is exactly the number that I was going to withdraw from EBI in the previous delisting proposal. No redemption of EAIT units will be allowed till the end of this year. Keeping EBI shares allows for some liquidity and reduces my EAIT stake to 5% of net worth (at the NAV value). The plan is to gradually wind up EBI and distribute the proceeds. My impression is that a big chunk will be distributed this year and then the remainder over the next few years. There can still be some hitches in this process mainly concerning financing. Currently EBI holds $1.57 in assets for every $1 in equity. This is accomplished through a swap provided by Macquarie Bank. Macquarie still hasn't said whether this financing arrangement will be maintained for EBI once EAIT is delisted and Laxey Partners become the effective investment manager for EBI. Financing for EAIT is in place (subject to some conditions).
In the meantime, the share price of EBB the current manager of EBI has skyrocketed from a low of 3.5 cents on December 8th to 12 cents at today's close and an intraday maximum of 14 cents. In response to an ASX query EBB stated that there is no news that the market is unaware of and that they will be announcing a positive operating profit for the financial year that closed 31st December. Actual P&L will be a loss due to writing off of intangible assets. The real news is that the various companies controlled by Steve Eckowitz have been selling shares in EBB including sales by Harsit Holdings of 17.7 million shares on 17th December and 14.9 million shares on 31st December. In total they have sold a net 34.3 million shares of the 48.8 million that they held last December. Ecko Investments sold essentially all of its 3.8 million shares - most of them in December and Pointyen Pty sold all its 225 thousand shares on 31st December. This seems to be due to margin calls related to ANZ from what I can tell. I suppose that traders think that the (forced) selling must now be over. Wingate Group's purchase at 4 cents a share is now looking like a brilliant move. I hold 20,000 shares with 10,000 bought on 17th December for 6.1 cents.
In the meantime, the share price of EBB the current manager of EBI has skyrocketed from a low of 3.5 cents on December 8th to 12 cents at today's close and an intraday maximum of 14 cents. In response to an ASX query EBB stated that there is no news that the market is unaware of and that they will be announcing a positive operating profit for the financial year that closed 31st December. Actual P&L will be a loss due to writing off of intangible assets. The real news is that the various companies controlled by Steve Eckowitz have been selling shares in EBB including sales by Harsit Holdings of 17.7 million shares on 17th December and 14.9 million shares on 31st December. In total they have sold a net 34.3 million shares of the 48.8 million that they held last December. Ecko Investments sold essentially all of its 3.8 million shares - most of them in December and Pointyen Pty sold all its 225 thousand shares on 31st December. This seems to be due to margin calls related to ANZ from what I can tell. I suppose that traders think that the (forced) selling must now be over. Wingate Group's purchase at 4 cents a share is now looking like a brilliant move. I hold 20,000 shares with 10,000 bought on 17th December for 6.1 cents.
Sunday, January 04, 2009
December 2008 Report
Finally an up month, and a market beating one at that, in US Dollar terms at least. However, due to the rise in the Australian Dollar this month we lost in AUD terms and AUD net worth also declined.
Income and Expenditure
Expenditure was $5,181 ($A7,420). We bought a TV (Samsung 32", Full HD (1080), LCD, about $A,1400), some furniture (about $A400), a bike for Snork Maiden ($A750), and health insurance for her stepfather who will be visiting Australia (about $A350). Non-investment income of $6,465 due to the refund of Snork Maiden's China trip costs. Retirement contributions were $684. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both gained in USD terms after taking into account the change in exchange rates.
Net Worth
Net worth rose by $10,158 to $205,660 or in Australian Dollar terms fell by $A4,202 to $294,558.
Investment Performance
USD returns were 4.12% vs. 3.67% or 1.06% for the MSCI and SPX respectively. In AUD terms we returned -2.41%.Using my preferred time series method, portfolio beta to the MSCI index was 1.36 with an annual alpha of 1.4%. Other methods now give a negative alpha. Individual investments made the following contributions to the result:
International and small cap Australian stocks made positive contributions. The top performer was the Challenger Infrastructure Fund which made an asset sale at carrying value during the month boosting confidence in its valuations. The fund is still trading at a massive discount to NAV. A similar positive valuation effect was seen for NDS following the European Union approving the buyout by News Corp and Permira. However, private equity funds MVC, 3i, and IPE all fell as did the TIAA Real Estate Fund and Everest Brown and Babcock despite the seeming resolution of the negative issues surrounding the fund.
Asset Allocation
At the end of October the allocation was 46% in "passive alpha", 60% in "beta", 1% was allocated to trading, 3% to industrial stocks, 5% to liquidity, 5% to other assets, and we were borrowing 20%. Due to the use of leveraged funds, our actual exposure to stocks was 104% of net worth. We regeared slightly. In November we were borrowing 17 cents for each dollar in equity; we are now borrowing 20 cents. When we take into borrowing by the leveraged funds we are invested in, borrowing per dollar of equity rose from 63 cents to 65 cents. Looking at asset classes:
Exposure to non-US foreign stocks rose due to market gains and purchases and exposure to hedge funds fell mainly due to the poor performance of EBI. We moved slightly towards our long-term asset allocation. The story of total assets (includes assets owned by leveraged funds) over the last few months is shown in this chart:
Our ownership of US stocks was particularly badly hit (13% of gross assets in August 4% now) due to market declines and subsequent margin calls.
Income and Expenditure
Expenditure was $5,181 ($A7,420). We bought a TV (Samsung 32", Full HD (1080), LCD, about $A,1400), some furniture (about $A400), a bike for Snork Maiden ($A750), and health insurance for her stepfather who will be visiting Australia (about $A350). Non-investment income of $6,465 due to the refund of Snork Maiden's China trip costs. Retirement contributions were $684. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both gained in USD terms after taking into account the change in exchange rates.
Net Worth
Net worth rose by $10,158 to $205,660 or in Australian Dollar terms fell by $A4,202 to $294,558.
Investment Performance
USD returns were 4.12% vs. 3.67% or 1.06% for the MSCI and SPX respectively. In AUD terms we returned -2.41%.Using my preferred time series method, portfolio beta to the MSCI index was 1.36 with an annual alpha of 1.4%. Other methods now give a negative alpha. Individual investments made the following contributions to the result:
International and small cap Australian stocks made positive contributions. The top performer was the Challenger Infrastructure Fund which made an asset sale at carrying value during the month boosting confidence in its valuations. The fund is still trading at a massive discount to NAV. A similar positive valuation effect was seen for NDS following the European Union approving the buyout by News Corp and Permira. However, private equity funds MVC, 3i, and IPE all fell as did the TIAA Real Estate Fund and Everest Brown and Babcock despite the seeming resolution of the negative issues surrounding the fund.
Asset Allocation
At the end of October the allocation was 46% in "passive alpha", 60% in "beta", 1% was allocated to trading, 3% to industrial stocks, 5% to liquidity, 5% to other assets, and we were borrowing 20%. Due to the use of leveraged funds, our actual exposure to stocks was 104% of net worth. We regeared slightly. In November we were borrowing 17 cents for each dollar in equity; we are now borrowing 20 cents. When we take into borrowing by the leveraged funds we are invested in, borrowing per dollar of equity rose from 63 cents to 65 cents. Looking at asset classes:
Exposure to non-US foreign stocks rose due to market gains and purchases and exposure to hedge funds fell mainly due to the poor performance of EBI. We moved slightly towards our long-term asset allocation. The story of total assets (includes assets owned by leveraged funds) over the last few months is shown in this chart:
Our ownership of US stocks was particularly badly hit (13% of gross assets in August 4% now) due to market declines and subsequent margin calls.
Wednesday, December 17, 2008
EBI's Performance
As I've reported, Everest Brown and Babcock Alternative Investment Trust (EBI.AX) has been in a lot of strife with investors. The main issue has been the discount of the stock price to NAV. The company proposed to delist the fund as a solution to that problem. But some large investors wanted to appoint a new manager or wind up the fund instead. Just how bad is the underlying investment performance of the fund?
Using the U.S. risk free rate, the beta and annual alpha of EBI's NAV relative to the Credit Suisse Tremont Hedge Fund Index were 1.68 and -4.32% for the life of the fund. Results for the HFRI index are almost identical. Using the RBA's cash rate instead the statistics are 1.66 and -2.72%. The high beta is expected due to the fund being leveraged into a portfolio of hedge funds via a swap facility provided by Macquarie Bank. I think that the correct risk free rate to use is the U.S. risk free rate. This is as the underlying funds are denominated in US Dollars and I assume Macquarie's swap is in terms of USD. Assuming fees of 1% + a 2% annual performance fee (20% annual performance * the 10% incentive rate) over the first two years of the fund when gains were positive means an average fee of 2.33%. On the face of it this indicates about 1.5% a year of negative skill. I wouldn't call this a disastrous situation though it's clearly not good that they don't at least earn their fees.
A complication arises though because the fund is supposedly hedged into Australian Dollars so that the returns reported in Australian Dollars are the same (or close to the same numbers) as the underlying funds report in U.S. dollars. To do this we could short the US Dollar and go long the Australian Dollar which can be accomplished by buying Australian Dollar futures contracts (for example the contract traded on the CME). Apart from the change in the exchange rate this contract earns the difference between the Australian Dollar and U.S. Dollar risk free rate.* An average of 2.63% over the life of EBI. And then this needs to be mulitiplied by the leverage ratio which is roughly equal to the beta. Assuming a perfect hedge we would need to deduct this earning of 4.3% per annum from the estimate of alpha!
But looking at the annual report, EBI never had a full hedge (in forwards) and by December 2007 only had a very small hedge in place. So at this point I got really confused and thought up various scenarios none of which I'm clear about. Perhaps Macquarie is doing the hedge and pocketing the interest differential while charging Everest the Australian rate for the leverage in the swap. So Macquarie takes Everest's money adds a loan to it and invests it in US hedge funds then sets up a hedge to remove the currency risk, earns the interest differential on the hedge and pays back Everest the USD percent returns earned by the hedge funds but in Australian Dollars?
Maybe someone can help me out. I think the only real way to know is to see the agreement between Macquarie and Everest and that's not in the annual report. The annual report doesn't even say that the counterparty is Macquarie.
Here is how the fund's NAV stacks up against the index in USD:
* This is why the Australian Dollar contract normally has a price below the spot price and the two prices converge towards expiry.
Using the U.S. risk free rate, the beta and annual alpha of EBI's NAV relative to the Credit Suisse Tremont Hedge Fund Index were 1.68 and -4.32% for the life of the fund. Results for the HFRI index are almost identical. Using the RBA's cash rate instead the statistics are 1.66 and -2.72%. The high beta is expected due to the fund being leveraged into a portfolio of hedge funds via a swap facility provided by Macquarie Bank. I think that the correct risk free rate to use is the U.S. risk free rate. This is as the underlying funds are denominated in US Dollars and I assume Macquarie's swap is in terms of USD. Assuming fees of 1% + a 2% annual performance fee (20% annual performance * the 10% incentive rate) over the first two years of the fund when gains were positive means an average fee of 2.33%. On the face of it this indicates about 1.5% a year of negative skill. I wouldn't call this a disastrous situation though it's clearly not good that they don't at least earn their fees.
A complication arises though because the fund is supposedly hedged into Australian Dollars so that the returns reported in Australian Dollars are the same (or close to the same numbers) as the underlying funds report in U.S. dollars. To do this we could short the US Dollar and go long the Australian Dollar which can be accomplished by buying Australian Dollar futures contracts (for example the contract traded on the CME). Apart from the change in the exchange rate this contract earns the difference between the Australian Dollar and U.S. Dollar risk free rate.* An average of 2.63% over the life of EBI. And then this needs to be mulitiplied by the leverage ratio which is roughly equal to the beta. Assuming a perfect hedge we would need to deduct this earning of 4.3% per annum from the estimate of alpha!
But looking at the annual report, EBI never had a full hedge (in forwards) and by December 2007 only had a very small hedge in place. So at this point I got really confused and thought up various scenarios none of which I'm clear about. Perhaps Macquarie is doing the hedge and pocketing the interest differential while charging Everest the Australian rate for the leverage in the swap. So Macquarie takes Everest's money adds a loan to it and invests it in US hedge funds then sets up a hedge to remove the currency risk, earns the interest differential on the hedge and pays back Everest the USD percent returns earned by the hedge funds but in Australian Dollars?
Maybe someone can help me out. I think the only real way to know is to see the agreement between Macquarie and Everest and that's not in the annual report. The annual report doesn't even say that the counterparty is Macquarie.
Here is how the fund's NAV stacks up against the index in USD:
* This is why the Australian Dollar contract normally has a price below the spot price and the two prices converge towards expiry.
Friday, December 12, 2008
Everest Babcock and Brown Alternative Investment Trust Changes Course Again
Everest Babcock and Brown Alternative Investment Trust (EBI.AX) changed course again, rendering my post from just a couple of days ago out of date. The fund has settled the legal dispute with Laxey Partners and will now follow two distinct tracks. Shareholders will be able to decide between swapping their units for units in an unlisted trust to be managed along the same lines as EBI by Everest Financial or to remain in the listed EBI which will be managed by a new manager and is likely to be wound up over time as hedge fund redemptions allow. All this is supposed to happen before the 30th of January. The main potential obstacle is Macquarie Group who are the provider of the swap that is used to leverage the underlying investments. NAV for November was also announced at $2.58 down 7.86% on the month. The stock currently trades for 80-90 cents.
As the 10% redemption offer has now been withdrawn, we will have $A7,000 less to pay off debt or make new investments.
As the 10% redemption offer has now been withdrawn, we will have $A7,000 less to pay off debt or make new investments.
Wednesday, December 10, 2008
Savings Policy
From now on we'll split all savings 50:50 between paying off debt (margin loans and credit card) and making new investments (in Snork Maiden's and my own Colonial First State accounts). Just another form of diversification. We are due to receive a refund of a large part of the costs of the China trip and hopefully get the moneys from redeeming EBI.AX units. In total that is $A12,000 to be reinvested. All this is on top of our regular $A400 monthly contributions to Snork Maiden's account.
Australian Fund Updates
Allco Equity Partners (AEP.AX): The Liberman family got a margin call and now ANZ owns the 25% of the company that they used to own and which had hoped they could sell to the now bankrupt Allco Finance Group for net asset value (about three times the current share price). Steve Eckowitz at EBB also got a margin call a while back. These wealthy families don't seem to be any smarter than me :) In the meantime, the company was trying to terminate its management agreement with Allco and rebrand. The courts just ruled against it. They're looking to appeal of course. They have also hired UBS to look at ways of reducing the discount in the share price.
Platinum Capital (PMC.AX): The very bold attempt to raise more capital with a 1:1 rights issue only raised a small fraction of the planned amount. Only 13,436,583 of the possible 127,163,967 shares were taken up but some shareholders asked for additional allotments of 2,878,901 shares. So they raised 12% of what they hoped for. They also raised a bit more with dividend reinvestment and a "share purchase plan".
Everest Brown and Babcock Alternative Investment Trust (EBI.AX): The fund is embroiled in legal proceedings over the planned delisting and the postponed shareholder meeting. I'm still hoping to get my redemption money on 19th December (the period was extended from 12th December). The stock is trading at about 1/3 of NAV. The AFR reported that there are rumors that the fund that is bringing proceedings (Laxey Partners) is being forced to sell units in the market due to margin calls.
Everest Brown and Babcock (EBB.AX): Not a fund, but a fund manager. Babcock and Brown (BNB.AX, which is close to bankruptcy) sold a 20% holding in EBB.AX to the Wingate Group which apparently is backed by the Smorgon family of Melbourne. One wealthy investor who didn't get a margin call or go bankrupt apparently :) This is good news I think because the company's share price of 4-5 cents (Smorgon bought at 4 cents and have already made 25% on their investment notionally!) looked like the market thought they were heading for bankruptcy too. Given the apparent smarts of this investor that would appear to not be the case. But $A2 million is peanuts for them so who knows.
Platinum Capital (PMC.AX): The very bold attempt to raise more capital with a 1:1 rights issue only raised a small fraction of the planned amount. Only 13,436,583 of the possible 127,163,967 shares were taken up but some shareholders asked for additional allotments of 2,878,901 shares. So they raised 12% of what they hoped for. They also raised a bit more with dividend reinvestment and a "share purchase plan".
Everest Brown and Babcock Alternative Investment Trust (EBI.AX): The fund is embroiled in legal proceedings over the planned delisting and the postponed shareholder meeting. I'm still hoping to get my redemption money on 19th December (the period was extended from 12th December). The stock is trading at about 1/3 of NAV. The AFR reported that there are rumors that the fund that is bringing proceedings (Laxey Partners) is being forced to sell units in the market due to margin calls.
Everest Brown and Babcock (EBB.AX): Not a fund, but a fund manager. Babcock and Brown (BNB.AX, which is close to bankruptcy) sold a 20% holding in EBB.AX to the Wingate Group which apparently is backed by the Smorgon family of Melbourne. One wealthy investor who didn't get a margin call or go bankrupt apparently :) This is good news I think because the company's share price of 4-5 cents (Smorgon bought at 4 cents and have already made 25% on their investment notionally!) looked like the market thought they were heading for bankruptcy too. Given the apparent smarts of this investor that would appear to not be the case. But $A2 million is peanuts for them so who knows.
Monday, November 24, 2008
Career Update
I met with the guy who might have some research funding and was trying to hire my student who got the job in Perth. He'll look at whether the funder would be interested in using the money for someone with my skills or whether they want their money back. We also discussed a bunch of topics he's interested in researching. They're all pretty fluffy as he admitted and I'm not sure how I can match them to my skills and come up with a proposal. We also talked about who else I should meet with. I went through a bunch of iterations of my job application with Snork Maiden and now I sent it out to our friend/colleague for some comments and also to one of my references, who I met this afternoon when I was on campus. Thursday is going to be my next chance to meet a bunch of relevant people at the open day I mentioned before.
On the investment front, Everest Babcock and Brown (EBB.AX) is proposing to change it's name to Everest Financial following the virtual collapse of Babcock and Brown. Also it will write off all it's intangible capital. At the still listed investment trust (EBI.AX) a major shareholder has decided to switch ranks and support removing EBB as manager. This might now delay the delisting and partial redemption of units in the trust. I was looking forward to getting some money out and reducing my margin loan. Maybe we'll have to wait longer for that. Platinum Capital (PMC.AX) only sold a small fraction of the shares it wanted to issue in a 1:1 rights issue. At least I sold my rights.
On the investment front, Everest Babcock and Brown (EBB.AX) is proposing to change it's name to Everest Financial following the virtual collapse of Babcock and Brown. Also it will write off all it's intangible capital. At the still listed investment trust (EBI.AX) a major shareholder has decided to switch ranks and support removing EBB as manager. This might now delay the delisting and partial redemption of units in the trust. I was looking forward to getting some money out and reducing my margin loan. Maybe we'll have to wait longer for that. Platinum Capital (PMC.AX) only sold a small fraction of the shares it wanted to issue in a 1:1 rights issue. At least I sold my rights.
Friday, November 07, 2008
Everest Babcock and Brown and Platinum Capital
Received the offer document for Platinum Capital's (PMC.AX) rights issue and Everest Babcock and Brown Investment Trust's (EBI.AX) withdrawal offer. Platinum granted shareholders the right to buy one new share for each share they own at a discounted price (well it was discounted at the time of the offer). I already sold my rights, which are essentially call options, on the stock market. Even if I had the money I wouldn't want to increase my position and currently the market price is equal to the exercise price.
EBI, which is planning to delist from the stock market is offering investors an opportunity to redeem some of their shares prior to delisting at a 7.5% discount to Net Asset Value. In total, up to 10% of all shares can be redeemed so if the offer is oversubscribed requests may be scaled back. I'm planning to redeem 31% of my shares. Despite the discount this price is much better than the current market price and it'll will be a year before another redemption is allowed. Still, I'll probably wait until October's NAV is published mid-month, before sending the form in.
EBI's management company is also in the news today with rumours of a takeover or some other transaction. The stock price of this firm has completely collapsed. It would be strange for the major stockholders to sell out at anywhere near this price - the P/E ratio is 1.6 based on last year's earnings and analyst's forecast a forward P/E of 3.8. But they probably need the money. A big one of course is Babcock and Brown.
I'd be happy with a price of 50 cents a share rather than the current 10 cents (or less). I'm ashamed to say that my net cost/breakeven point is 71 cents a share.
EBI, which is planning to delist from the stock market is offering investors an opportunity to redeem some of their shares prior to delisting at a 7.5% discount to Net Asset Value. In total, up to 10% of all shares can be redeemed so if the offer is oversubscribed requests may be scaled back. I'm planning to redeem 31% of my shares. Despite the discount this price is much better than the current market price and it'll will be a year before another redemption is allowed. Still, I'll probably wait until October's NAV is published mid-month, before sending the form in.
EBI's management company is also in the news today with rumours of a takeover or some other transaction. The stock price of this firm has completely collapsed. It would be strange for the major stockholders to sell out at anywhere near this price - the P/E ratio is 1.6 based on last year's earnings and analyst's forecast a forward P/E of 3.8. But they probably need the money. A big one of course is Babcock and Brown.
I'd be happy with a price of 50 cents a share rather than the current 10 cents (or less). I'm ashamed to say that my net cost/breakeven point is 71 cents a share.
Monday, September 22, 2008
EBI Proposes to Delist from the ASX
The Everest Brown and Babcock listed fund of hedge funds, EBI, proposed today to delist from the ASX. This is the same fund whose downgrading by CommSec triggered my margin call. BTW, the redemption of Colonial First State Funds seems to have gone through OK. Now you can see why I just didn't sell the downgraded stocks! The proposal is a little complicated and has some similarities to the recent delisting proposal of Ellerston GEMS:
Prior to delisting (expected to occur in December 2008): A “Withdrawal Offer” of 10% of units on issue at a fixed price equal to a 7.5% discount to EBI’s then stated NTA per Unit.
At 31 December 2009: A one–off redemption facility for 25% of remaining units on issue at a 7.5% discount to EBI’s then stated NTA per Unit.
From 31 December 2010: On-going semi-annual redemption facilities at EBI’s then stated NTA per Unit.
Large shareholders will be able to be paid their investment in specie into a separately managed account.
I'll probably look to decrease my holding on market or at the first "withdrawal offer" and then participating with 2-3% of net worth in the unlisted fund. Currently EBI is about 5% of my net worth and at the 7.5% discount to NTA would be about 6.5% of net worth.
Carrousel Capital and Babcock and Brown who are both major shareholders are supporting the proposal but Laxey Partners is calling for an EGM to wind up the trust. Shareholders are still squabbling over the Ellerston GEMS delisting.
Prior to delisting (expected to occur in December 2008): A “Withdrawal Offer” of 10% of units on issue at a fixed price equal to a 7.5% discount to EBI’s then stated NTA per Unit.
At 31 December 2009: A one–off redemption facility for 25% of remaining units on issue at a 7.5% discount to EBI’s then stated NTA per Unit.
From 31 December 2010: On-going semi-annual redemption facilities at EBI’s then stated NTA per Unit.
Large shareholders will be able to be paid their investment in specie into a separately managed account.
I'll probably look to decrease my holding on market or at the first "withdrawal offer" and then participating with 2-3% of net worth in the unlisted fund. Currently EBI is about 5% of my net worth and at the 7.5% discount to NTA would be about 6.5% of net worth.
Carrousel Capital and Babcock and Brown who are both major shareholders are supporting the proposal but Laxey Partners is calling for an EGM to wind up the trust. Shareholders are still squabbling over the Ellerston GEMS delisting.
Friday, September 19, 2008
U.S. Government Goes Insane
That's what it feels like. Bears won't be happy. UK stock market is up 9.3% at this moment.
In other news, I went to pick up my Mac laptop but when I got it home I found it hadn't actually been fixed at all. It's been lying in the storeroom at the Canberra City store for the last two weeks I think. In fact they didn't know where it was at first and phoned up all the other stores to see if it had accidentally been sent there. Outrageous.
I didn't hear anything on the outcome of my margin call. At least closing prices in Australia will have been a bit higher today. It's a shame that they decided to downgrade EBB and EBI and force me into selling something. I guess I should never be near the margin limit in case something of that sort happens in the future.
In other news, I went to pick up my Mac laptop but when I got it home I found it hadn't actually been fixed at all. It's been lying in the storeroom at the Canberra City store for the last two weeks I think. In fact they didn't know where it was at first and phoned up all the other stores to see if it had accidentally been sent there. Outrageous.
I didn't hear anything on the outcome of my margin call. At least closing prices in Australia will have been a bit higher today. It's a shame that they decided to downgrade EBB and EBI and force me into selling something. I guess I should never be near the margin limit in case something of that sort happens in the future.
Margin Call Resolution
After a lot of rushing around faxing and phoning (I don't have a fax machine at home) it looks like we have a resolution to my margin call caused by the downgrading of EBI and EBB by CommSec. I am selling units in CFS Conservative Fund (all my non-superannuation units) and half of my CFS Global Resources Funds. Both of these sales will actually be capital gains, though off their best prices of course. This will about halve the size of my margin loan with CommSec to about $50,000. The downside of selling these funds is that they are marginable and so I need to sell a large amount to get back inside my margin limits. I would have to sell only about a quarter as much of my non-marginable stocks. But I'm loathe to sell stuff that is trading way below book value or what I think is fair value, which is the case for most of my non-marginable stocks and my other marginable stocks in fact like Challenger Infrastructure Fund.
A tip - CommSec said they didn't get my fax yesterday because I faxed it to the "back office" - the number on the redemption form and on the website - and of course there is chaos there at the moment. So this morning I faxed it again to the "front office". And then I phoned up to check they really did have it. So it's worth checking where to fax required forms to in an emergency.
A tip - CommSec said they didn't get my fax yesterday because I faxed it to the "back office" - the number on the redemption form and on the website - and of course there is chaos there at the moment. So this morning I faxed it again to the "front office". And then I phoned up to check they really did have it. So it's worth checking where to fax required forms to in an emergency.
Thursday, September 18, 2008
Margin Call
Things continue to get worse. I am now in margin call territory with CommSec because they reduced the lending ratio on EBI and EBB to 0% as these two stocks are supposedly are "Babcock Satelites". The main worry with EBI would be their total return swap with Macquarie Bank. Maybe some of the joint investments they did with Babcock, though these are a small part of the portfolio. I sold Qantas but it makes little difference. I'm going to have to sell more stuff if they don't revert this loan ratio back to something positive.
Tuesday, September 02, 2008
August 2008 Report
This month was OK, we lagged the MSCI index by about 1% resulting in a negative return and loss of net worth in US Dollar terms and gains in Australian Dollar terms, due to the 9% fall in the Australian Dollar over the month. The pound fell 8% and the Euro 6% against the USD.
As result, total returns (or accumulation index) in Australian Dollar terms have now caught up with total returns in US Dollar terms, which had been outperforming in the last few years, as measured from the 1996 inception point:
MSCI total returns are now also back in line with SPX total returns over the entire period though still outperforming over the last 5 years. It's depressing that we've made very little progress since the beginning of this decade, but neither have the major stock indices. The SPX has returned just 0.22% per year (this includes dividends) since 31st December 1999 while the MSCI has returned 1.98% per year. I've returned 4.66% per annum in USD terms and 2.10% in AUD terms. After taxes and inflation all of these are probably negative returns. In Australian Dollars the MSCI has returned -1.15%.
So there was again negative progress on our annual goals, which is reported on in the first part of this report. Other statistics appear towards the end of the report. All amounts are in U.S. Dollars unless otherwise stated.
1. Net Worth Goal: Reaching $500k In US Dollars we fell back $12,979 to $391,463, while in Australian Dollars we gained $A27,728 to reach $A457,209. Despite the increase in Australian Dollars, we are still way below the year's starting point at $A511,281.
2. Alpha Goal: Alpha of 8.5% The point of this goal is to earn at least an average wage from risk-adjusted excess returns. Using my preferred time-series method, our returns had a beta of 1.07 and an alpha of 6.0% with respect to the MSCI World index, which lags our annual goal and is worse than last month. The risk adjusted excess return for August based on this analysis was -0.8%. Multiplying this by net worth gives a loss of $3,124. For the year so far, the risk-adjusted excess return in dollar terms has been $3,982. Using the estimate of alpha, the smoothed annual income is $23,715. Most other performance metrics are equally poor in recent months. I "re-equitised" too soon and then didn't "de-equitise" enough at the May peak though I did do some rebalancing. I then increased leverage again too early in the down wave from the May high to the July low.
3. Increasing Non-Retirement Net Worth by More than the MSCI Index The point of this goal is to make sure that we only spend out of non-investment income and excess returns and don't use the normal market return on investments to fund spending. In other words, this makes sure we have positive saving. So far this year these accounts have declined by 5.11% more than the MSCI return so that we are dissaving, by this measure.
4. Achieving Break-Even on U.S. Taxable Accounts We made a $1,636 or 2.26% gain this month on US Taxable and Roth IRA accounts. My Interactive Brokers account gained 9.24%. The NDX gained 1.26% for the month. We are still more than $10,000 from breakeven after achieving breakeven in May.
5. Make at Least $10,000 from Trading Realised gains this month were $1,059 and so far this year $3,149. Even though I didn't do any active trading I closed positions in PSPT and NNDS and I mark to market my CFD position.
Background Statistics
Income and Expenditure
Expenditure was $3,598, which is what it typically is when there are no unusual expenditures and just day to day living costs. Non-investment income was also at baseline levels. Non-retirement accounts had $3,579 in underlying gains while retirement accounts did much better this month with $9,383 in gains. Foreign currency movements removed $25,348 from USD net worth.
Investment Performance
Investment return in US Dollars was -3.06% vs. a 2.11% loss in the MSCI (Gross) All Country World Index, which I use as my overall benchmark. Returns in Australian Dollars and currency neutral terms were 6.71% and 3.20% respectively. So far this year we have lost 14.05%, while the MSCI has lost 14.55%.
The contributions of the different investments and trades are as follows:
The big winner was Australian shares as represented by the CFS Geared Share Fund, Conservative Fund, Developing Companies Fund, and Future Leaders Funds as well as Clime Capital, the SPI CFD, and Qantas among others. Takeovers of NDS and PeopleSupport also generated nice returns. The worst performer was the EBI listed hedge fund of funds whose decline mostly represents an increase in the discount to net asset value. On the other hand, Allco Equity Partners saw a decline in its discount. Resource stocks also declined and the former Loftus Capital Partners continued its miserable share price performance. At least the company is buying back stock.
Asset Allocation
Allocation was 47% in "passive alpha", 73% in "beta", 2% was allocated to trading, 8% to industrial stocks, 3% to liquidity, 3% to other assets and we were borrowing 36%. Due to the use of leveraged funds, our actual exposure to stocks was 134% of net worth. Leverage declined and we increased exposure to private equity and reduced exposure to stocks:
The first two columns of percentages in the table indicate how much of net worth was allocated to investment in each asset class in July and August. The fourth column gives the percentage of total underlying assets in each asset class. In other words, rather than accounting for a levered share fund by how much we are investing in it, we are counting the shares that they own. In total we are borrowing an additional 85 cents explicitly or implicitly for each dollar of net worth. Due to using levered stock funds and derivatives the shares of the non-equity asset classes are lower than their shares in net worth. I didn't account for leverage in non-equity funds, but probably I should in future. I also broke out managed futures for the first time under "commodities". We have less than 1% exposure to this asset class.
Our currency exposures were roughly 54% Australian Dollar, 24% US Dollar, and 22% Other and Global.
As result, total returns (or accumulation index) in Australian Dollar terms have now caught up with total returns in US Dollar terms, which had been outperforming in the last few years, as measured from the 1996 inception point:
MSCI total returns are now also back in line with SPX total returns over the entire period though still outperforming over the last 5 years. It's depressing that we've made very little progress since the beginning of this decade, but neither have the major stock indices. The SPX has returned just 0.22% per year (this includes dividends) since 31st December 1999 while the MSCI has returned 1.98% per year. I've returned 4.66% per annum in USD terms and 2.10% in AUD terms. After taxes and inflation all of these are probably negative returns. In Australian Dollars the MSCI has returned -1.15%.
So there was again negative progress on our annual goals, which is reported on in the first part of this report. Other statistics appear towards the end of the report. All amounts are in U.S. Dollars unless otherwise stated.
1. Net Worth Goal: Reaching $500k In US Dollars we fell back $12,979 to $391,463, while in Australian Dollars we gained $A27,728 to reach $A457,209. Despite the increase in Australian Dollars, we are still way below the year's starting point at $A511,281.
2. Alpha Goal: Alpha of 8.5% The point of this goal is to earn at least an average wage from risk-adjusted excess returns. Using my preferred time-series method, our returns had a beta of 1.07 and an alpha of 6.0% with respect to the MSCI World index, which lags our annual goal and is worse than last month. The risk adjusted excess return for August based on this analysis was -0.8%. Multiplying this by net worth gives a loss of $3,124. For the year so far, the risk-adjusted excess return in dollar terms has been $3,982. Using the estimate of alpha, the smoothed annual income is $23,715. Most other performance metrics are equally poor in recent months. I "re-equitised" too soon and then didn't "de-equitise" enough at the May peak though I did do some rebalancing. I then increased leverage again too early in the down wave from the May high to the July low.
3. Increasing Non-Retirement Net Worth by More than the MSCI Index The point of this goal is to make sure that we only spend out of non-investment income and excess returns and don't use the normal market return on investments to fund spending. In other words, this makes sure we have positive saving. So far this year these accounts have declined by 5.11% more than the MSCI return so that we are dissaving, by this measure.
4. Achieving Break-Even on U.S. Taxable Accounts We made a $1,636 or 2.26% gain this month on US Taxable and Roth IRA accounts. My Interactive Brokers account gained 9.24%. The NDX gained 1.26% for the month. We are still more than $10,000 from breakeven after achieving breakeven in May.
5. Make at Least $10,000 from Trading Realised gains this month were $1,059 and so far this year $3,149. Even though I didn't do any active trading I closed positions in PSPT and NNDS and I mark to market my CFD position.
Background Statistics
Income and Expenditure
Expenditure was $3,598, which is what it typically is when there are no unusual expenditures and just day to day living costs. Non-investment income was also at baseline levels. Non-retirement accounts had $3,579 in underlying gains while retirement accounts did much better this month with $9,383 in gains. Foreign currency movements removed $25,348 from USD net worth.
Investment Performance
Investment return in US Dollars was -3.06% vs. a 2.11% loss in the MSCI (Gross) All Country World Index, which I use as my overall benchmark. Returns in Australian Dollars and currency neutral terms were 6.71% and 3.20% respectively. So far this year we have lost 14.05%, while the MSCI has lost 14.55%.
The contributions of the different investments and trades are as follows:
The big winner was Australian shares as represented by the CFS Geared Share Fund, Conservative Fund, Developing Companies Fund, and Future Leaders Funds as well as Clime Capital, the SPI CFD, and Qantas among others. Takeovers of NDS and PeopleSupport also generated nice returns. The worst performer was the EBI listed hedge fund of funds whose decline mostly represents an increase in the discount to net asset value. On the other hand, Allco Equity Partners saw a decline in its discount. Resource stocks also declined and the former Loftus Capital Partners continued its miserable share price performance. At least the company is buying back stock.
Asset Allocation
Allocation was 47% in "passive alpha", 73% in "beta", 2% was allocated to trading, 8% to industrial stocks, 3% to liquidity, 3% to other assets and we were borrowing 36%. Due to the use of leveraged funds, our actual exposure to stocks was 134% of net worth. Leverage declined and we increased exposure to private equity and reduced exposure to stocks:
The first two columns of percentages in the table indicate how much of net worth was allocated to investment in each asset class in July and August. The fourth column gives the percentage of total underlying assets in each asset class. In other words, rather than accounting for a levered share fund by how much we are investing in it, we are counting the shares that they own. In total we are borrowing an additional 85 cents explicitly or implicitly for each dollar of net worth. Due to using levered stock funds and derivatives the shares of the non-equity asset classes are lower than their shares in net worth. I didn't account for leverage in non-equity funds, but probably I should in future. I also broke out managed futures for the first time under "commodities". We have less than 1% exposure to this asset class.
Our currency exposures were roughly 54% Australian Dollar, 24% US Dollar, and 22% Other and Global.
Friday, August 01, 2008
Frustrating Month
But at least it was better than last month. On the other hand I'm going to record "trading" losses for the first time in six months. I didn't really do any active trading apart from dealing with an expiring short options position but I mark to market my still open CFD position (SPI (ASX 200 Futures)). The Australian Dollar fell, reinforcing below market returns in US Dollar terms. Full details coming soon. The chart above though could be construed as an inverted head and shoulders formation and weekly charts definitely look like a near term bottom is in place.
I started working on our Australian tax returns. Putting together the spreadsheet for calculating Snork Maiden's tax return. It's the easier of the two but still plenty to learn about. For example, she's not a temporary resident for tax purposes because she is married to an Australian citizen. This means that interest received on her HSBC savings account must be included. However, foreign interest doesn't enter the "interest" box on the tax return but is included in "foreign source income". I vaguely remember that sort of thing from the last time I did an Australian tax return in 2002 (I previously lived in Australia from 1996 to 2002). However, I won't be able to submit Snork Maiden's return until I've completed mine. If my net income comes in sufficiently low we might be able to claim the spouse offset (offset = tax credit in US jargon). I won't be able to complete my tax return till I get full details of distributions from EBI and CIF in late August. But if my income is already over the limit before including those distributions we'll be able to submit Snork Maiden's return fairly soon. She should get a refund as she only worked for 9 months of the year, but has had tax withheld at the rate that would apply if she worked the full year. Unlike the US you don't actually compute on your tax return how much money you either owe the government or they owe you. But the tools are provided to allow you to estimate it.
I stopped by the ATO "shopfront" this morning and picked up a bunch of extra forms and information booklets. I still prefer to have a hard copy rather than a pdf. Also we have to submit our returns on the paper forms as electronic filing is only available if you have previously submitted a return and also the software doesn't work on Apple computers...
Tuesday, June 17, 2008
Macquarie Capital Alliance Group to be Privatised
Another Macquarie private equity listed fund to be delisted. This bodes well for my various Australian listed funds that are trading at huge discounts to book value: EBI, AEP, IPE, CAM, and PMC. Though CAM and PMC are more traditional share funds. EBI continues to attract new hedge fund investors. The manager of the fund referenced in the EBI announcement, Andrew Weiss, was a professor of economics at my Alma Mater, Boston University. I remember once I went to look for him for some reason, but never did meet him. Some grad student was sitting in his office. EBI are going to introduce a buyback facility that will come into play whenever the fund trades 10% below book value. The problem with AEP is of course that it was an Allco sponsored fund, so no privatization likely there, though I expect another more serious takeover effort if it continues to trade so cheaply.
Friday, January 25, 2008
Update
We've bounced another $4k off the low point and are now only down $16k for the month. I've now made a profit of about $US750 in trading this month, which I hope I can hold onto. No trades for today but I've put a bunch of lowball bids in on Australian closed end funds to see if they get hit. Babcock and Brown (BNB.AX) bought a bunch of EBI.AX and EBB.AX which is a nice vote of confidence after the battering those two stocks have received. Interactive Brokers (IBKR) announced nice results but the stock sold off after hours. I didn't sell (maybe I'll regret this). Microsoft announced very nice numbers and soared AH and currently the NQ futures are up about 15 points. This also lifted AAPL a little AH. So the rally seems intact and my plan is still to hold till Tuesday's close and model depending sell a bunch of stuff and hedge then before the FOMC meeting.
Thursday, January 10, 2008
Annual Report: Asset Allocation
The table shows our asset allocation at the account and security level at the end of 2007 (before my recent flurry of trades). The split by currency is not perfect - for example the CFS Conservative Fund has foreign (to Australia) investments while Platinum Capital is partially hedged into Australian Dollars. "Passive Alpha" investments obviously have plenty of correlation with the market (I call them "passive alpha" to distinguish them from my own active trading). I include in this category all financial stocks and funds whose performance would be expected to contain significant sources of return which aren't pure stockmarket beta. This includes a fund of hedge funds (EBI), hedgefund like funds (Hussman, TFS, Platinum Capital), real estate funds (Challenger, TIAA, Newcastle), and private equity (Allco). The Clime fund (CAM.AX) is a long-only closed end fund but deliberately does not track market benchmarks and is very focused. My rationale for counting a stock like Interactive Brokers (IBKR) as alpha is that the majority of their income comes from market-making. If this isn't a source of alpha in the financial markets, I don't know what is. There are also fund management companies (Clime and EBB), a bank (HCBK), and insurance companies (Berkshire and Safety). Beta investments are more traditional mutual funds, which can be pure stock plays or diversified or even bonds, which have less stock market beta. We only had one trading position at the end of 2007 - Beazer (a homebuilder) put options. It was doing OK. I only have two non-financial stocks listed under "industrial stocks" - Symbion and FTS. I don't believe that I have an edge in picking individual stocks so I don't do much of it. But investing in a bank stock, for example, is a way of indirectly getting exposure to a financial asset class (loans) that is hard to invest in otherwise. All the other categories of accounts either support our lifestyle or investing (margin loans). By using margin loans we are 98% invested in long-term investments as well as having 6% allocated to trading, while having liquidity for everyday life.
The table doesn't split things down by retirement and non-retirement accounts. 47% of the total is in retirement accounts.
In retrospect, I have been too conservative in my beta investments in the last couple of years, though now it is beginning to pay off to some degree. On the other hand, my passive alpha investments, which had been doing well, took a distinct turn for the worse from the August "quant crisis" onwards. I plan to get more aggressive in my beta investments once there are some clearer signs of a bottom in the stockmarket. I'll also be adding new passive alpha investments and aiming over time to reduce the percentage allocation to Australian Dollars.
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